Housing Bubble

inoculatedinvestor's picture

This week's link fest has a common theme: the unintended consequences of government actions. I include the US Fed in the government category for obvious reasons. Between Greenspan’s beliefs in efficient markets, Bernanke’s Great Moderation, tax credits for housing and the Fed’s current unlimited money printing, it is amazing how much damage can be done by the wrong ideas and policies.

Norway Is First European Country To Lift Interest Rates

After interest rates had been lifted in several commodity producing countries, the rate game is shifting to the old continent, where Norway has become the first country to announce it is raising its interest rate by 0.25% and has signaled it anticipates steeper increases over the next three years as "inflation accelerates and unemployment remains low." Count the NOK as the latest currency that will be using the dollar as a short-funding vehicle.

Frontrunning: October 28

  • K1 hedge fund snared in probe as Barclays, JPMorgan face losses (Bloomberg)
  • 48596th time's the charm- after all it's only some paper and ink...GMAC may receive third bailout package from US government (Bloomberg)
  • Real homes of genius: Culver City and the housing Stockholm Syndrome. Approximately 5 percent of current home price is related to government bailouts (Dr. Housing Bubble)
  • Last benefits of stimulus felt as durable goods rise 1%, 0.9% ex transportation (AP, Census Bureau)
  • "Jobs created or saved" is White House fantasy (Bloomberg)
  • More OutrAIGe (The Nation)
Leo Kolivakis's picture

The Chinese Disconnect?

The big question is how will other nations respond to the symbiotic relationship between the U.S. and China? This week we saw Asian currencies declining on intervention speculation. Will we see intervention in the currency markets? I am not sure, but the current path is unsustainable and will require some sort of intervention as it poses serious risks to the global recovery.

Freddie Mac Annualized Defaults Hit Record High At 7.3%, Even As Lending Increases Once Again

With the US government now having taken over the functions of such pristine subprime lenders as New Century, with the provision that it not only is not checking borrowers' credit scores, income potential, or other "facts" that the mortgage lenders at least pretended to care about, but also giving away massive incentives to promote housing bubble V2, it was only a matter of time before the taxpayer's balance sheet would start looking like an AngeloMozilo wet dream. Today, Freddie Mac released its September Monthly Volume Summary and, as expected, it is beginning to look just like the subprime debacle is among us, only this time all of America is on the hook thanks to a brilliant Fed and the even more brilliant geniuses in D.C.

PIMCO Dumps $80 Billion of Fed-Sponsored Agencies On Taxpayer's Lap; Makes Over $1 Billion

As everyone else has been cheering the revival of the housing bubble, one person has been busy offloading a significant portion of his exposure to housing: Bill Gross. And the direct sponsor of billions of dollars hitting Mr. Gross' Wells Fargo banking account, why, the US taxpayer of course, courtesy of the Fed's printing press which continues keeping prices artificially high. With the Fed en route to purchase nearly one and a half trillion in Agency and MBS paper (for now), it has found eager sellers in the face of PIMCO. MarketWatch reports that PIMCO sold $30 billion in agency paper in September alone, and has sold over $80 billion year to date.

Leo Kolivakis's picture

Curb Your Enthusiasm?

I believe monetary authorities are desperately trying to reflate the real economy by flooding the financial system with a tsunami of liquidity. Asset bubbles are being formed as we speak. Equity and commodity prices will head much higher but it remains to be seen whether higher asset prices will translate into higher real prices. Stay tuned, but in the meantime you might want to curb your enthusiasm and remain very alert as asset prices disconnect from fundamentals.

Frontrunning: October 19

  • Must read Abelson: A whiff of reality (Barron's)
  • BB&T reports slumps as credit issues weigh (Reuters)
  • Dutch DSB Bank bankrupt after sale failure (BBC)
  • CIT's changes do little to enhance debt swap, according to CreditSights (Bloomberg)
  • Gennett ad sales still dropping despite Q3 profit (AP)
  • C'mon Ben - it's time to raise rates (Barron's)

Weekend Reading

  • The best unknown activist investment of 2009 (Greenbackd)
  • Words from the wise (Financial Armageddon)
  • CME in talks to buy CBOE for $5 billion (Bloomberg)
  • UBS warned U.S. customers by registered mail their account details may be given to U.S. tax authorities (Reuters)
  • Goldman can spare you a dime (NYT)
  • The extinction of ethics in finance - The Fallout (Reality Arbiter)
inoculatedinvestor's picture

My version of link aggregation is slightly different from that of many other bloggers. I try to be highly selective in terms of what I link to and focus on themes that I think are really important for all investors. As such, I usually provide just a few links but include the most relevant excerpts and my own commentary. I hope enjoy the links I have selected for this week.

Q3 Foreclosure Activity Increases 5% in Q3, Highest Ever Recorded By RealtyTrac

“Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,” said James J. Saccacio, chief executive officer of RealtyTrac. “REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties.”

Frontrunning: October 14

  • JPMorgan reports better than expected results, loan losses increase (AP)
  • Japan bond optimism at 8-month high as growth prospects before second largest economy wane (Bloomberg)
  • China to curb steel production to reduce oversupply (Bloomberg, h/t deadhead)
  • Geithner aides reaped millions working for banks (Bloomberg, h/t donald)
  • Don't reinflate the old bubbles (WaPo)
  • Dollar slumps to 14 month low (Reuters)
EB's picture

A Lesson in Transparency by the NY Fed

Chief executive officer and president of the Federal Reserve Bank of New York (and ex-Goldmanite), William Dudley, delivered a speech this afternoon that contains, with supreme gall and irony, a subsection called “Transparency.” The title of the speech was thoughtfully crafted to allow a redirect. So here we go…